Banner Corporation Reports Increased Loan Demand, Strong Deposit Growth and Net Income of $54.4 Million, or $1.56 Per Diluted Share, for Second Quarter 2021; Declares Quarterly Cash Dividend of $0.41 Per Share

Rhea-AI Summary

Banner Corporation (BANR) reported a net income of $54.4 million ($1.56/share) for Q2 2021, a 16% increase from Q1 and a 131% increase year-over-year. Total revenues rose to $149.9 million, up 6% sequentially. The board declared a quarterly dividend of $0.41 per share, payable on August 13, 2021. Key highlights include a 6% decrease in net loans, while core deposits increased 16% year-over-year to $12.76 billion. The provision for credit losses showed improvement with a recovery of $10.3 million.

Positive

• Net income increased by 16% quarter-over-quarter and 131% year-over-year.
• Total revenues rose 6% to $149.9 million compared to the previous quarter.
• Core deposits grew 16% year-over-year to $12.76 billion.
• Quarterly dividend declared at $0.41 per share demonstrates ongoing shareholder returns.

Negative

• Net loans decreased by 3% from the previous quarter and 6% year-over-year.
• Mortgage banking revenues dropped 35% from the previous quarter and 47% year-over-year.

WALLA WALLA, Wash., July 21, 2021 (GLOBE NEWSWIRE) -- Banner Corporation (NASDAQ GSM: BANR) (“Banner”), the parent company of Banner Bank, today reported net income of $54.4 million, or $1.56 per diluted share, for the second quarter of 2021, a 16% increase compared to $46.9 million, or $1.33 per diluted share, for the preceding quarter and a 131% increase compared to $23.5 million, or $0.67 per diluted share, for the second quarter of 2020. Banner’s second quarter 2021 results include $10.3 million in recapture of provision for credit losses, compared to $28.6 million in provision for credit losses in the second quarter of 2020. The second quarter 2020 provision for credit losses was primarily the result of the impact of the COVID-19 pandemic. In the first six months of 2021, net income was $101.2 million, or $2.88 per diluted share, compared to net income of $40.4 million, or $1.14 per diluted share for the same period a year earlier. Banner’s first six months of 2021 results include $19.5 million in recapture of provision for credit losses, compared to $52.1 million in provision for credit losses in the first six months of 2020.

Banner announced that its Board of Directors declared a regular quarterly cash dividend of $0.41 per share. The dividend will be payable August 13, 2021, to common shareholders of record on August 3, 2021.

“Banner’s second quarter 2021 performance continues to demonstrate the success of our super community bank model, even with the challenges of the COVID-19 pandemic,” said Mark Grescovich, President and CEO. “We benefited from continued core deposit growth and an acceleration of PPP loan fee income as a result of SBA PPP loan forgiveness. The unprecedented level of market liquidity along with proceeds from new PPP loan originations, and our continued focus on building client relationships contributed to our core deposits increasing 16% compared to June 30, 2020.”

“Due to the ongoing improvement in forecasted economic conditions in our markets, coupled with continued reductions in our adversely classified loans, we recorded a $10.3 million recapture to our provision for credit losses during the current quarter. This compares to a $9.3 million recapture to our provision for credit losses during the preceding quarter and a $28.6 million provision for credit losses in the second quarter a year ago. Our allowance for credit losses - loans remains strong at 1.53% of total loans and 481% of non-performing loans at June 30, 2021, compared to 1.57% of total loans and 426% of non-performing loans at March 31, 2021,” said Grescovich. “Banner has provided PPP loans totaling nearly $1.61 billion to 13,922 businesses as of June 30, 2021, and as of quarter end, we had received SBA forgiveness for 6,707 PPP loans totaling $822.3 million. Our essential onsite employees, such as those working in our branches, continue to serve clients in person. In addition, as a result of the accelerated distribution of the COVID-19 vaccine over the past several months and the progress made toward fully reopening businesses in the states we serve, we began to normalize our operations by returning additional groups of employees back to Bank worksites in July 2021.”

At June 30, 2021, Banner Corporation had $16.18 billion in assets, $9.51 billion in net loans and $13.64 billion in deposits. Banner operates 155 branch offices, including branches located in eight of the top 20 largest western Metropolitan Statistical Areas by population.

Second Quarter 2021 Highlights

• Revenues increased 6% to $149.9 million, compared to $141.9 million in the preceding quarter, and increased 2% when compared to $147.3 million in the second quarter a year ago.
• Net interest income, before the recapture of provision for credit losses, increased to $127.6 million in the second quarter of 2021, compared to $117.7 million in the preceding quarter and $119.6 million in the second quarter a year ago.
• Net interest margin on a tax equivalent basis was 3.52%, compared to 3.44% in the preceding quarter and 3.87% in the second quarter a year ago.
• Mortgage banking revenues decreased 35% to $7.5 million, compared to $11.4 million in the preceding quarter, and decreased 47% compared to $14.1 million in the second quarter a year ago.
• Return on average assets was 1.36%, compared to 1.24% in the preceding quarter and 0.68% in the second quarter a year ago.
• Net loans receivable decreased to $9.51 billion at June 30, 2021, compared to $9.79 billion at March 31, 2021, and decreased 6% when compared to $10.13 billion at June 30, 2020.
• Non-performing assets decreased to $31.5 million, or 0.19% of total assets, at June 30, 2021, compared to $37.0 million, or 0.23% of total assets in the preceding quarter, and decreased from $39.9 million, or 0.28% of total assets, at June 30, 2020.
• The allowance for credit losses - loans was $148.0 million, or 1.53% of total loans receivable, as of June 30, 2021, compared to $156.1 million, or 1.57% of total loans receivable as of March 31, 2021 and $156.4 million or 1.52% of total loans receivable as of June 30, 2020.
• Core deposits (non-interest-bearing and interest-bearing transaction and savings accounts) increased 1% to $12.76 billion at June 30, 2021, compared to $12.64 billion at March 31, 2021, and increased 16% compared to $10.97 billion a year ago. Core deposits represented 94% of total deposits at June 30, 2021.
• Dividends to shareholders were $0.41 per share in the quarter ended June 30, 2021.
• Common shareholders’ equity per share increased 4% to $48.31 at June 30, 2021, compared to $46.60 at the preceding quarter end, and increased 5% from $46.22 a year ago.
• Tangible common shareholders’ equity per share* increased 5% to $36.99 at June 30, 2021, compared to $35.29 at the preceding quarter end, and increased 6% from $34.89 a year ago.
• Banner repurchased 250,000 shares of its common stock during the quarter at an average cost of $58.22 per share.
  

*Tangible common shareholders’ equity per share and the ratio of tangible common equity to tangible assets (both of which exclude goodwill and other intangible assets, net), and references to adjusted revenue (which excludes fair value adjustments and net gain (loss) on the sale of securities from the total of net interest income and non-interest income) and the adjusted efficiency ratio (which excludes merger and acquisition-related expenses, COVID-19 expenses, amortization of core deposit intangibles, real estate owned operations and state/municipal taxes from non-interest expense divided by adjusted revenue) represent non-GAAP (Generally Accepted Accounting Principles) financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. Where applicable, comparable earnings information using GAAP financial measures is also presented. See also Non-GAAP Financial Measures reconciliation tables on the last two pages of this press release.

Income Statement Review

Net interest income, before the recapture of provision for credit losses, was $127.6 million in the second quarter of 2021, compared to $117.7 million in the preceding quarter and $119.6 million in the second quarter a year ago.

Banner’s net interest margin on a tax equivalent basis was 3.52% for the second quarter of 2021, an eight basis-point increase compared to 3.44% in the preceding quarter and a 35 basis-point decrease compared to 3.87% in the second quarter a year ago.

“Interest income was higher, primarily as a result of the decline in low yielding PPP loans and a corresponding acceleration of deferred loan fee income due to loan repayments from SBA loan forgiveness, which positively affected our net interest margin during the quarter. Net interest margin was also impacted by the growth in core deposit balances, resulting in our deploying excess liquidity into low yielding short term investments,” said Grescovich. “Additionally, the on-going low interest rate environment continues to put downward pressure on loan yields.” Acquisition accounting adjustments added three basis points to the net interest margin in the current quarter, five basis points in the preceding quarter and seven basis points in the second quarter a year ago. The total purchase discount for acquired loans was $12.5 million at June 30, 2021, compared to $13.9 million at March 31, 2021, and $20.2 million at June 30, 2020. In the first six months of 2021, Banner’s net interest margin on a tax equivalent basis was 3.48% compared to 4.05% in the first six months of 2020.

Average interest-earning asset yields increased four basis points to 3.68% in the second quarter compared to 3.64% for the preceding quarter and decreased 48 basis points compared to 4.16% in the second quarter a year ago. Average loan yields increased 27 basis points to 4.70% compared to 4.43% in the preceding quarter and increased 13 basis points compared to 4.57% in the second quarter a year ago. The increase in average loan yields during the current quarter compared to the preceding quarter was primarily the result of the decline in low yielding SBA PPP loans due to loan repayments from SBA loan forgiveness during the quarter, partially offset by lower rates on new originations and adjustable-rate loans resetting to lower current market rates. Loan discount accretion added five basis points to average loan yields in the second quarter of 2021, seven basis points in the preceding quarter and eight basis points in the second quarter a year ago. Deposit costs were 0.09% in the second quarter of 2021, a two basis-point decrease compared to the preceding quarter and a 14 basis-point decrease compared to the second quarter a year ago. The year-over-year decrease in quarterly deposit costs was primarily the result of decreases in market interest rates during 2020. The total cost of funds was 0.17% during the second quarter of 2021, a four basis-point decrease compared to the preceding quarter and a 14 basis-point decrease compared to the second quarter a year ago.

Banner recorded a $10.3 million recapture of provision for credit losses in the current quarter (comprised of an $8.1 million recapture credit losses - loans and a $2.2 million recapture unfunded loan commitments). This recapture compares to a $9.3 million recapture of provision for credit losses in the prior quarter (comprised of an $8.0 million recapture credit losses - loans and $1.2 million recapture unfunded loan commitments) and a $28.6 million provision for credit losses in the second quarter a year ago (comprised of a $29.5 million provision for credit losses - loans and a $905,000 recapture unfunded loan commitments). The recapture of provision for credit losses for the current quarter primarily reflects improvement in forecasted economic indicators and a decrease in adversely classified loans since the preceding quarter end, while the recapture of the provision for credit losses recorded in the preceding quarter primarily reflected a decrease in loan balances, excluding PPP loans, as well as improvement in the forecasted economic indicators. The provision for credit losses recorded in the second quarter a year ago primarily reflected expected lifetime credit losses based upon the economic conditions and the potential effects from forecasted deterioration of economic metrics due to the COVID-19 pandemic based on the outlook as of June 30, 2020.

Total non-interest income was $22.3 million in the second quarter of 2021, compared to $24.3 million in the preceding quarter and $27.7 million in the second quarter a year ago. Deposit fees and other service charges were $9.8 million in the second quarter of 2021, compared to $8.9 million in the preceding quarter and $7.5 million in the second quarter a year ago. The increase in deposit fees and other service charges from the second quarter a year ago is primarily a result of increased transaction deposit account activity. Mortgage banking revenues, including gains on one- to four-family and multifamily loan sales and loan servicing fees, decreased to $7.5 million in the second quarter, compared to $11.4 million in the preceding quarter and $14.1 million in the second quarter of 2020. The lower mortgage banking revenue quarter-over-quarter primarily reflects a decrease in the gain on sale margin on one- to four-family held-for-sale loans and a reduction in the volume of one- to four-family loans sold reflecting a decrease in refinance activity. The decrease compared to the second quarter of 2020 was primarily due to a decrease in the gain on sale margin on one- to four-family held-for-sale loans, partially offset by higher gains on the sale of multifamily held-for-sale loans. Home purchase activity accounted for 66% of one- to four-family mortgage loan originations in the second quarter of 2021, compared to 54% in the prior quarter and 42% in the second quarter of 2020. In the first six months of 2021, total non-interest income decreased 1% to $46.6 million, compared to $46.9 million in the first six months of 2020.

Banner’s second quarter 2021 results included a $58,000 net gain for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value, principally comprised of certain investment securities held for trading, and a $77,000 net gain on the sale of securities. In the preceding quarter, results included a $59,000 net gain for fair value adjustments and a $485,000 net gain on the sale of securities. In the second quarter a year ago, results included a $2.2 million net gain for fair value adjustments and a $93,000 net gain on the sale of securities.

Total revenue increased 6% to $149.9 million for the second quarter of 2021, compared to $141.9 million in the preceding quarter, and increased 2% compared to $147.3 million in the second quarter a year ago. Year-to-date, total revenues increased 2% to $291.8 million compared to $285.7 million for the same period one year earlier. Adjusted revenue* (the total of net interest income and total non-interest income excluding the net gain or loss on the sale of securities and the net change in valuation of financial instruments) was $149.8 million in the second quarter of 2021, compared to $141.4 million in the preceding quarter and $145.0 million in the second quarter of 2020. In the first six months of the year, adjusted revenue* was $291.1 million, compared to $287.9 million in the first six months of 2020.

Total non-interest expense was $92.6 million in the second quarter of 2021, compared to $93.5 million in the preceding quarter and $90.5 million in the second quarter of 2020. The decrease in non-interest expense for the current quarter compared to the prior quarter primarily reflects a $2.9 million decrease in salary and employee benefits expense as the prior quarter included $1.3 million of severance expense related to a reduction in staffing and a $1.2 million adjustment recorded to increase the liability related to deferred compensation plans. These decreases in salary and employee benefits expense for the current quarter were partially offset by a $1.0 million increase in professional and legal expenses. The year-over-year quarterly increase in non-interest expense also reflects decreased capitalized loan origination costs, primarily related to the decline in the origination of PPP loans during the current quarter compared to the same quarter a year ago as well as increases in professional and legal expenses and miscellaneous non-interest expense. The year-over-year quarterly increases in non-interest expense were partially offset by decreases in salary and employee benefits and COVID-19 expenses. Merger and acquisition-related expenses were $79,000 for the second quarter of 2021, compared to $571,000 for the preceding quarter and $336,000 in the second quarter a year ago. COVID-19 expenses were $117,000 for the second quarter of 2021, compared to $148,000 for the preceding quarter and $2.2 million in the second quarter a year ago. Year-to-date, total non-interest expense was $186.2 million, compared to $184.0 million in the same period a year earlier. Banner’s efficiency ratio was 61.79% for the current quarter, compared to 65.90% in the preceding quarter and 61.47% in the year ago quarter. Banner’s adjusted efficiency ratio* was 59.77% for the current quarter, compared to 63.85% in the preceding quarter and 58.58% in the year ago quarter.

For the second quarter of 2021, Banner had $13.1 million in state and federal income tax expense for an effective tax rate of 19.5%, reflecting the benefits from tax exempt income. Banner’s statutory income tax rate is 23.7%, representing a blend of the statutory federal income tax rate of 21.0% and apportioned effects of the state income tax rates.

Balance Sheet Review

Total assets increased to $16.18 billion at June 30, 2021, compared to $16.12 billion at March 31, 2021, and increased 12% when compared to $14.41 billion at June 30, 2020. The total of securities and interest-bearing deposits held at other banks was $5.19 billion at June 30, 2021, compared to $4.81 billion at March 31, 2021 and $2.30 billion at June 30, 2020. The average effective duration of Banner's securities portfolio was approximately 4.6 years at June 30, 2021, compared to 4.0 years at June 30, 2020.

Net loans receivable decreased 3% to $9.51 billion at June 30, 2021, compared to $9.79 billion at March 31, 2021, and decreased 6% when compared to $10.13 billion at June 30, 2020. The decrease in net loans compared to the prior quarter primarily reflects the forgiveness of SBA PPP loans, partially offset by increases in commercial real estate, multifamily real estate and construction loans. Commercial real estate and multifamily real estate loans increased 2% to $4.14 billion at June 30, 2021, compared to $4.05 billion at March 31, 2021, and increased 1% compared to $4.11 billion a year ago. Commercial business loans decreased 14% to $2.68 billion at June 30, 2021 compared to $3.09 billion at March 31, 2021, and decreased 15% compared to $3.15 billion a year ago, primarily due to PPP loans forgiven. Agricultural business loans increased to $265.4 million at June 30, 2021, compared to $262.4 million three months earlier and decreased from $328.1 million a year ago. Total construction, land and land development loans were $1.37 billion at June 30, 2021, a 4% increase from $1.31 billion at March 31, 2021, and an 11% increase compared to $1.24 billion a year earlier. Consumer loans decreased to $560.7 million at June 30, 2021, compared to $570.7 million at March 31, 2021, and $642.4 million a year ago. One- to four-family loans decreased to $637.7 million at June 30, 2021, primarily reflecting held for investment loans being refinanced and sold as held for sale loans, compared to $655.6 million at March 31, 2021, and $817.8 million a year ago.

Loans held for sale were $71.7 million at June 30, 2021, compared to $135.3 million at March 31, 2021, and $258.7 million at June 30, 2020. The volume of one- to four- family residential mortgage loans sold was $266.7 million in the current quarter, compared to $300.3 million in the preceding quarter and $292.4 million in the second quarter a year ago. During the second quarter of 2021, Banner sold $83.9 million in multifamily loans, compared to $107.7 million in the preceding quarter and $3.1 million in the second quarter a year ago.

Total deposits increased 1% to $13.64 billion at June 30, 2021, compared to $13.55 billion at March 31, 2021, and increased 13% when compared to $12.02 billion a year ago. The year-over-year increase in total deposits was due primarily to SBA PPP loan funds deposited into client accounts and an increase in general client liquidity due to reduced business investment and consumer spending during the COVID-19 pandemic. Non-interest-bearing account balances increased 2% to $6.09 billion at June 30, 2021, compared to $5.99 billion at March 31, 2021, and increased 15% compared to $5.28 billion a year ago. Core deposits increased 1% to 94% of total deposits at June 30, 2021, compared to 93% of total deposits at March 31, 2021 and increased 16% compared to a year ago. Certificates of deposit decreased to $873.0 million at June 30, 2021, compared to $907.0 million at March 31, 2021, and decreased 16% compared to $1.04 billion a year earlier. Banner had no brokered deposits at June 30, 2021 or March 31, 2021, compared to $119.4 million a year ago. FHLB borrowings totaled $100.0 million at both June 30, 2021 and March 31, 2021, compared to $150.0 million a year ago.

At June 30, 2021, total common shareholders’ equity was $1.67 billion, or 10.32% of assets, compared to $1.62 billion or 10.04% of assets at March 31, 2021, and $1.63 billion or 11.28% of assets a year ago. At June 30, 2021, tangible common shareholders’ equity*, which excludes goodwill and other intangible assets, net, was $1.28 billion, or 8.09% of tangible assets*, compared to $1.23 billion, or 7.80% of tangible assets, at March 31, 2021, and $1.23 billion, or 8.76% of tangible assets, a year ago. Banner’s tangible book value per share* increased to $36.99 at June 30, 2021, compared to $34.89 per share a year ago.

Banner and its subsidiary bank continue to maintain capital levels in excess of the requirements to be categorized as “well-capitalized.” At June 30, 2021, Banner's common equity Tier 1 capital ratio was 11.21%, its Tier 1 leverage capital to average assets ratio was 8.86%, and its total capital to risk-weighted assets ratio was 14.62%.

Credit Quality

The allowance for credit losses - loans was $148.0 million at June 30, 2021, or 1.53% of total loans receivable outstanding and 481% of non-performing loans, compared to $156.1 million at March 31, 2021, or 1.57% of total loans receivable outstanding and 426% of non-performing loans, and $156.4 million at June 30, 2020, or 1.52% of total loans receivable outstanding and 418% of non-performing loans. In addition to the allowance for credit losses - loans, Banner maintains an allowance for credit losses - unfunded loan commitments, which was $9.9 million at June 30, 2021, compared to $12.1 million at March 31, 2021 and $10.6 million at June 30, 2020. Net loan recoveries totaled $55,000 in the second quarter of 2021, compared to net loan charge-offs of $3.2 million in the preceding quarter and $3.7 million of net loan charge-offs in the second quarter a year ago. Banner recorded a $10.3 million recapture of provision for credit losses in the current quarter, compared to a $9.3 million recapture of provision for credit losses in the prior quarter and a $28.6 million provision for loan losses in the year ago quarter. The recapture of provision for credit losses for the current quarter primarily reflects an improvement in the forecasted economic indicators and a decrease in adversely classified loans, while the recapture of the provision for credit losses recorded in the preceding quarter primarily reflected the decrease in loan balances, excluding the increase in PPP loans, as well as improvement in the forecasted economic indicators. The provision for credit losses recorded in the second quarter a year ago reflected deterioration as a result of the COVID-19 pandemic in the economic indicators utilized to forecast credit losses. Non-performing loans were $30.8 million at June 30, 2021, compared to $36.6 million at March 31, 2021, and $37.4 million a year ago. Real estate owned and other repossessed assets were $780,000 at June 30, 2021, compared to $377,000 at March 31, 2021, and $2.4 million a year ago.

In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net purchase discount to the loans’ contractual amounts, a portion of which reflects a discount for possible credit losses. Credit discounts were included in the determination of fair value, and as a result, no allowance for credit losses was recorded for loans acquired from acquisitions prior to January 1, 2020. At June 30, 2021, the total purchase discount for acquired loans was $12.5 million.

Banner’s total substandard loans were $272.8 million at June 30, 2021, compared to $311.6 million at March 31, 2021, and $359.8 million a year ago. The quarter over quarter decrease reflects the payoff of substandard loans as well as risk rating upgrades as certain industries impacted by the COVID-19 pandemic have begun to stabilize.

Banner’s total non-performing assets were $31.5 million, or 0.19% of total assets, at June 30, 2021, compared to $37.0 million, or 0.23% of total assets, at March 31, 2021, and $39.9 million, or 0.28% of total assets, a year ago.

At June 30, 2021, Banner had 71 loans totaling $28.5 million remaining on loan payment deferral due to COVID-19 including 62 mortgage loans totaling $20.2 million operating under forbearance agreements. Since these loans were performing loans that were current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings pursuant to applicable accounting and regulatory guidance.

Conference Call

Banner will host a conference call on Thursday, July 22, 2021, at 8:00 a.m. PDT, to discuss its second quarter results. To listen to the call on-line, go to www.bannerbank.com. Investment professionals are invited to dial (866) 235-9915 to participate in the call. A replay will be available for one week at (877) 344-7529 using access code 10157551, or at www.bannerbank.com.

About the Company

Banner Corporation is a $16.18 billion bank holding company operating one commercial bank in four Western states through a network of branches offering a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.

Forward-Looking Statements

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “potential,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made and based only on information then actually known to Banner.  Banner does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements and could negatively affect Banner’s operating and stock price performance.

The COVID-19, pandemic is adversely affecting us, our clients, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Deterioration in general business and economic conditions, including increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses, which could necessitate additional provisions for credit losses, resulting both from loans originated and loans acquired from other financial institutions; (2) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for credit losses or writing down of assets or impose restrictions or penalties with respect to Banner’s activities; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on client behavior and net interest margin; (5) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (6) fluctuations in real estate values; (7) the ability to adapt successfully to technological changes to meet clients’ needs and developments in the market place; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in Washington, Idaho, Oregon and California in particular; (11) the costs, effects and outcomes of litigation; (12) legislation or regulatory changes, including but not limited to the impact of the Dodd-Frank Act and regulations adopted thereunder, changes in regulatory capital requirements pursuant to the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; (14) future acquisitions by Banner of other depository institutions or lines of business; (15) future goodwill impairment due to changes in Banner’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; and (16) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.

RESULTS OF OPERATIONS		Quarters Ended															Six Months Ended
(in thousands except shares and per share data)		Jun 30, 2021					Mar 31, 2021					Jun 30, 2020					Jun 30, 2021					Jun 30, 2020
INTEREST INCOME:
Loans receivable		$	115,391				$	108,924				$	115,173				$	224,315				$	234,099
Mortgage-backed securities		11,437					9,371					7,983					20,808					17,120
Securities and cash equivalents		6,737					6,226					5,591					12,963					9,193
		133,565					124,521					128,747					258,086					260,412
INTEREST EXPENSE:
Deposits		3,028					3,609					6,694					6,637					15,444
Federal Home Loan Bank advances		655					934					984					1,589					3,048
Other borrowings		124					109					238					233					354
Junior subordinated debentures and subordinated notes		2,204					2,208					1,251					4,412					2,728
		6,011					6,860					9,167					12,871					21,574
Net interest income		127,554					117,661					119,580					245,215					238,838
(RECAPTURE)/PROVISION FOR CREDIT LOSSES		(10,256		)			(9,251		)			28,623					(19,507		)			52,093
Net interest income after (recapture)/provision for credit losses		137,810					126,912					90,957					264,722					186,745
NON-INTEREST INCOME:
Deposit fees and other service charges		9,758					8,939					7,546					18,697					17,349
Mortgage banking operations		7,478					11,440					14,138					18,918					24,329
Bank-owned life insurance		1,245					1,307					2,317					2,552					3,367
Miscellaneous		3,720					2,042					1,427					5,762					4,066
		22,201					23,728					25,428					45,929					49,111
Net gain on sale of securities		77					485					93					562					171
Net change in valuation of financial instruments carried at fair value		58					59					2,199					117					(2,397		)
Total non-interest income		22,336					24,272					27,720					46,608					46,885
NON-INTEREST EXPENSE:
Salary and employee benefits		61,935					64,819					63,415					126,754					123,323
Less capitalized loan origination costs		(8,768		)			(9,696		)			(11,110		)			(18,464		)			(16,916		)
Occupancy and equipment		12,823					12,989					12,985					25,812					26,092
Information / computer data services		5,602					6,203					6,084					11,805					11,894
Payment and card processing services		4,975					4,326					3,851					9,301					8,091
Professional and legal expenses		4,371					3,328					2,163					7,699					4,082
Advertising and marketing		1,181					1,263					652					2,444					2,479
Deposit insurance expense		1,241					1,533					1,705					2,774					3,340
State/municipal business and use taxes		1,083					1,065					1,104					2,148					2,088
Real estate operations		118					(242		)			4					(124		)			104
Amortization of core deposit intangibles		1,711					1,711					2,002					3,422					4,003
Miscellaneous		6,156					5,509					5,199					11,665					11,556
		92,428					92,808					88,054					185,236					180,136
COVID-19 expenses		117					148					2,152					265					2,391
Merger and acquisition-related expenses		79					571					336					650					1,478
Total non-interest expense		92,624					93,527					90,542					186,151					184,005
Income before provision for income taxes		67,522					57,657					28,135					125,179					49,625
PROVISION FOR INCOME TAXES		13,140					10,802					4,594					23,942					9,202
NET INCOME		$	54,382				$	46,855				$	23,541				$	101,237				$	40,423
Earnings per share available to common shareholders:
Basic		$	1.57				$	1.34				$	0.67				$	2.90				$	1.14
Diluted		$	1.56				$	1.33				$	0.67				$	2.88				$	1.14
Cumulative dividends declared per common share		$	0.41				$	0.41				$	—				$	0.82				$	0.41
Weighted average common shares outstanding:
Basic		34,736,639					34,973,383					35,189,260					34,854,357					35,326,401
Diluted		34,933,714					35,303,483					35,283,690					35,149,986					35,545,086
(Decrease) increase in common shares outstanding		(184,455		)			(423,857		)			55,440					(608,312		)			(593,677		)

FINANCIAL  CONDITION																						Percentage Change
(in thousands except shares and per share data)		Jun 30, 2021					Mar 31, 2021					Dec 31, 2020					Jun 30, 2020					Prior Qtr				Prior Yr Qtr
ASSETS
Cash and due from banks		$	329,359				$	296,184				$	311,899				$	291,036				11.2		%		13.2		%
Interest-bearing deposits		1,138,572					1,353,743					922,284					128,938					(15.9	)	%		783.0		%
Total cash and cash equivalents		1,467,931					1,649,927					1,234,183					419,974					(11.0	)	%		249.5		%
Securities - trading		25,097					25,039					24,980					23,239					0.2		%		8.0		%
Securities - available for sale		3,275,979					2,989,760					2,322,593					1,706,781					9.6		%		91.9		%
Securities - held to maturity		455,256					441,857					421,713					441,075					3.0		%		3.2		%
Total securities		3,756,332					3,456,656					2,769,286					2,171,095					8.7		%		73.0		%
Equity securities		—					—					—					340,052					nm				(100.0	)	%
Federal Home Loan Bank stock		14,001					14,001					16,358					16,363					—		%		(14.4	)	%
Securities purchased under agreements to resell		300,000					—					—					—					nm				nm
Loans held for sale		71,741					135,263					243,795					258,700					(47.0	)	%		(72.3	)	%
Loans receivable		9,654,181					9,947,697					9,870,982					10,283,999					(3.0	)	%		(6.1	)	%
Allowance for credit losses - loans		(148,009		)			(156,054		)			(167,279		)			(156,352		)			(5.2	)	%		(5.3	)	%
Net loans receivable		9,506,172					9,791,643					9,703,703					10,127,647					(2.9	)	%		(6.1	)	%
Accrued interest receivable		46,979					49,214					46,617					48,806					(4.5	)	%		(3.7	)	%
Real estate owned (REO) held for sale, net		763					340					816					2,400					124.4		%		(68.2	)	%
Property and equipment, net		156,063					161,268					164,556					173,360					(3.2	)	%		(10.0	)	%
Goodwill		373,121					373,121					373,121					373,121					—		%		—		%
Other intangibles, net		18,004					19,715					21,426					25,155					(8.7	)	%		(28.4	)	%
Bank-owned life insurance		192,677					191,388					191,830					190,468					0.7		%		1.2		%
Operating lease right-of-use assets		55,287					56,217					55,367					57,667					(1.7	)	%		(4.1	)	%
Other assets		222,786					221,039					210,565					200,799					0.8		%		10.9		%
Total assets		$	16,181,857				$	16,119,792				$	15,031,623				$	14,405,607				0.4		%		12.3		%
LIABILITIES
Deposits:
Non-interest-bearing		$	6,090,063				$	5,994,693				$	5,492,924				$	5,281,559				1.6		%		15.3		%
Interest-bearing transaction and savings accounts		6,673,598					6,647,196					6,159,052					5,692,715					0.4		%		17.2		%
Interest-bearing certificates		873,047					906,978					915,320					1,042,006					(3.7	)	%		(16.2	)	%
Total deposits		13,636,708					13,548,867					12,567,296					12,016,280					0.6		%		13.5		%
Advances from Federal Home Loan Bank		100,000					100,000					150,000					150,000					—		%		(33.3	)	%
Customer repurchase agreements and other borrowings		237,736					216,260					184,785					166,084					9.9		%		43.1		%
Subordinated notes, net		98,380					98,290					98,201					98,140					0.1		%		0.2		%
Junior subordinated debentures at fair value		117,520					117,248					116,974					109,613					0.2		%		7.2		%
Operating lease liabilities		59,117					59,884					59,343					61,390					(1.3	)	%		(3.7	)	%
Accrued expenses and other liabilities		216,399					313,801					143,300					133,574					(31.0	)	%		62.0		%
Deferred compensation		46,786					46,625					45,460					45,423					0.3		%		3.0		%
Total liabilities		14,512,646					14,500,975					13,365,359					12,780,504					0.1		%		13.6		%
SHAREHOLDERS’ EQUITY
Common stock		1,311,455					1,326,269					1,349,879					1,345,096					(1.1	)	%		(2.5	)	%
Retained earnings		319,505					279,582					247,316					201,448					14.3		%		58.6		%
Other components of shareholders’ equity		38,251					12,966					69,069					78,559					195.0		%		(51.3	)	%
Total shareholders’ equity		1,669,211					1,618,817					1,666,264					1,625,103					3.1		%		2.7		%
Total liabilities and shareholders’ equity		$	16,181,857				$	16,119,792				$	15,031,623				$	14,405,607				0.4		%		12.3		%
Common Shares Issued:
Shares outstanding at end of period		34,550,888					34,735,343					35,159,200					35,157,899
Common shareholders’ equity per share (1)		$	48.31				$	46.60				$	47.39				$	46.22
Common shareholders’ tangible equity per share (1) (2)		$	36.99				$	35.29				$	36.17				$	34.89
Common shareholders’ tangible equity to tangible assets (2)		8.09			%		7.80			%		8.69			%		8.76			%
Consolidated Tier 1 leverage capital ratio		8.86			%		9.10			%		9.50			%		9.83			%

(1)		Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares outstanding.
(2)		Common shareholders’ tangible equity excludes goodwill and other intangible assets.  Tangible assets exclude goodwill and other intangible assets.  These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables on the final two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
																		Percentage Change
LOANS		Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Jun 30, 2020				Prior Qtr				Prior Yr Qtr
Commercial real estate:
Owner-occupied		$	1,066,237			$	1,045,656			$	1,076,467			$	1,027,399			2.0		%		3.8		%
Investment properties		1,950,211				1,931,805				1,955,684				2,017,789				1.0		%		(3.3	)	%
Small balance CRE		621,102				639,330				573,849				624,726				(2.9	)	%		(0.6	)	%
Multifamily real estate		504,445				433,775				428,223				437,201				16.3		%		15.4		%
Construction, land and land development:
Commercial construction		182,868				199,037				228,937				215,860				(8.1	)	%		(15.3	)	%
Multifamily construction		295,661				305,694				305,527				256,335				(3.3	)	%		15.3		%
One- to four-family construction		603,895				542,840				507,810				528,966				11.2		%		14.2		%
Land and land development		290,404				266,730				248,915				235,602				8.9		%		23.3		%
Commercial business:
Commercial business		1,124,359				1,096,303				1,133,989				1,250,288				2.6		%		(10.1	)	%
PPP		807,172				1,280,291				1,044,472				1,121,928				(37.0	)	%		(28.1	)	%
Small business scored		743,975				717,502				743,451				779,678				3.7		%		(4.6	)	%
Agricultural business, including secured by farmland:
Agricultural business, including secured by farmland		247,467				226,094				299,949				328,077				9.5		%		(24.6	)	%
PPP		17,962				36,316				—				—				(50.5	)	%		nm
One- to four-family residential		637,701				655,627				717,939				817,787				(2.7	)	%		(22.0	)	%
Consumer:
Consumer—home equity revolving lines of credit		458,915				466,132				491,812				515,603				(1.5	)	%		(11.0	)	%
Consumer—other		101,807				104,565				113,958				126,760				(2.6	)	%		(19.7	)	%
Total loans receivable		$	9,654,181			$	9,947,697			$	9,870,982			$	10,283,999			(3.0	)	%		(6.1	)	%
Restructured loans performing under their restructured terms		$	5,472			$	6,424			$	6,673			$	6,391
Loans 30 - 89 days past due and on accrual		$	5,656			$	19,233			$	12,291			$	20,807
Total delinquent loans (including loans on non-accrual), net		$	23,582			$	42,444			$	36,131			$	36,269
Total delinquent loans  /  Total loans receivable		0.24		%		0.43		%		0.37		%		0.35		%

LOANS BY GEOGRAPHIC LOCATION																					Percentage Change
		Jun 30, 2021							Mar 31, 2021				Dec 31, 2020				Jun 30, 2020				Prior Qtr				Prior Yr Qtr
		Amount				Percentage			Amount				Amount				Amount
Washington		$	4,541,792			47.0	%		$	4,683,600			$	4,647,553			$	4,787,550			(3.0	)	%		(5.1	)	%
California		2,246,580				23.3	%		2,320,384				2,279,749				2,359,703				(3.2	)	%		(4.8	)	%
Oregon		1,753,285				18.2	%		1,801,104				1,792,156				1,899,933				(2.7	)	%		(7.7	)	%
Idaho		525,610				5.4	%		539,061				537,996				592,515				(2.5	)	%		(11.3	)	%
Utah		92,103				1.0	%		92,399				80,704				67,929				(0.3	)	%		35.6		%
Other		494,811				5.1	%		511,149				532,824				576,369				(3.2	)	%		(14.2	)	%
Total loans receivable		$	9,654,181			100.0	%		$	9,947,697			$	9,870,982			$	10,283,999			(3.0	)	%		(6.1	)	%

ADDITIONAL FINANCIAL INFORMATION (dollars in thousands)
LOAN ORIGINATIONS	Quarters Ended
	Jun 30, 2021				Mar 31, 2021				Jun 30, 2020
Commercial real estate	$	103,415			$	91,217			$	111,765
Multifamily real estate	45,674				12,878				6,384
Construction and land	509,828				447,369				290,955
Commercial business:
Commercial business	181,996				115,911				167,268
SBA PPP	55,990				428,180				1,151,170
Agricultural business	12,546				27,167				16,293
One-to four-family residential	47,086				57,731				24,537
Consumer	131,424				87,322				126,653
Total loan originations (excluding loans held for sale)	$	1,087,959			$	1,267,775			$	1,895,025

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Quarters Ended
CHANGE IN THE		Jun 30, 2021					Mar 31, 2021					Jun 30, 2020
ALLOWANCE FOR CREDIT LOSSES - LOANS
Balance, beginning of period		$	156,054				$	167,279				$	130,488
(Recapture)/provision for credit losses - loans		(8,100		)			(8,035		)			29,524
Recoveries of loans previously charged off:
Commercial real estate		147					24					54
Construction and land		—					100					105
One- to four-family real estate		20					113					31
Commercial business		321					979					370
Agricultural business, including secured by farmland		8					—					22
Consumer		97					296					60
		593					1,512					642
Loans charged off:
Commercial real estate		(3		)			(3,763		)			—
Construction and land		—					—					(100		)
Commercial business		(123		)			(789		)			(3,553		)
Agricultural business, including secured by farmland		(2		)			—					(62		)
Consumer		(410		)			(150		)			(587		)
		(538		)			(4,702		)			(4,302		)
Net recoveries (charge-offs)		55					(3,190		)			(3,660		)
Balance, end of period		$	148,009				$	156,054				$	156,352
Net recoveries (charge-offs) / Average loans receivable		0.001			%		(0.032		)	%		(0.036		)	%

ALLOCATION OF
ALLOWANCE FOR CREDIT LOSSES - LOANS		Jun 30, 2021				Mar 31, 2021				Jun 30, 2020
Specific or allocated credit loss allowance:
Commercial real estate		$	60,349			$	59,411			$	53,166
Multifamily real estate		5,807				4,367				3,504
Construction and land		30,899				36,440				36,916
One- to four-family real estate		9,800				7,988				12,746
Commercial business		30,830				31,411				33,870
Agricultural business, including secured by farmland		3,256				4,617				4,517
Consumer		7,068				11,820				11,633
Total allowance for credit losses - loans		$	148,009			$	156,054			$	156,352
Allowance for credit losses - loans / Total loans receivable		1.53		%		1.57		%		1.52		%
Allowance for credit losses - loans / Non-performing loans		481		%		426		%		418		%

		Quarters Ended
CHANGE IN THE		Jun 30, 2021					Mar 31, 2021					Jun 30, 2020
ALLOWANCE FOR CREDIT LOSSES - UNFUNDED LOAN COMMITMENTS
Balance, beginning of period		$	12,077				$	13,297				$	11,460
Recapture for credit losses - unfunded loan commitments		(2,168		)			(1,220		)			(905		)
Balance, end of period		$	9,909				$	12,077				$	10,555

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
	Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Jun 30, 2020
NON-PERFORMING ASSETS
Loans on non-accrual status:
Secured by real estate:
Commercial	$	17,427			$	21,615			$	18,199			$	10,845
Construction and land	541				986				936				732
One- to four-family	4,007				4,456				3,556				2,942
Commercial business	3,673				4,194				5,407				18,486
Agricultural business, including secured by farmland	1,200				1,536				1,743				433
Consumer	1,799				2,244				2,719				2,412
	28,647				35,031				32,560				35,850
Loans more than 90 days delinquent, still on accrual:
Secured by real estate:
Commercial	911				—				—				—
One- to four-family	579				1,524				1,899				472
Commercial business	495				37				1,025				1
Agricultural business, including secured by farmland	—				—				—				1,061
Consumer	131				—				130				36
	2,116				1,561				3,054				1,570
Total non-performing loans	30,763				36,592				35,614				37,420
REO	763				340				816				2,400
Other repossessed assets	17				37				51				47
Total non-performing assets	$	31,543			$	36,969			$	36,481			$	39,867
Total non-performing assets to total assets	0.19		%		0.23		%		0.24		%		0.28		%

	Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Jun 30, 2020
LOANS BY CREDIT RISK RATING
Pass	$	9,315,264			$	9,584,429			$	9,494,147			$	9,869,917
Special Mention	66,103				51,692				36,598				54,291
Substandard	272,814				311,576				340,237				359,791
Total	$	9,654,181			$	9,947,697			$	9,870,982			$	10,283,999

	Quarters Ended														Six Months Ended
REAL ESTATE OWNED	Jun 30, 2021				Mar 31, 2021					Jun 30, 2020					Jun 30, 2021					Jun 30, 2020
Balance, beginning of period	$	340			$	816				$	2,402				$	816				$	814
Additions from loan foreclosures	423				—					—					423					1,588
Proceeds from dispositions of REO	—				(783		)			(98		)			(783		)			(98		)
Gain on sale of REO	—				307					96					307					96
Balance, end of period	$	763			$	340				$	2,400				$	763				$	2,400

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
DEPOSIT COMPOSITION																		Percentage Change
		Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Jun 30, 2020				Prior Qtr				Prior Yr Qtr
Non-interest-bearing		$	6,090,063			$	5,994,693			$	5,492,924			$	5,281,559			1.6		%		15.3		%
Interest-bearing checking		1,736,696				1,722,085				1,569,435				1,399,593				0.8		%		24.1		%
Regular savings accounts		2,646,302				2,597,731				2,398,482				2,197,790				1.9		%		20.4		%
Money market accounts		2,290,600				2,327,380				2,191,135				2,095,332				(1.6	)	%		9.3		%
Total interest-bearing transaction and savings accounts		6,673,598				6,647,196				6,159,052				5,692,715				0.4		%		17.2		%
Total core deposits		12,763,661				12,641,889				11,651,976				10,974,274				1.0		%		16.3		%
Interest-bearing certificates		873,047				906,978				915,320				1,042,006				(3.7	)	%		(16.2	)	%
Total deposits		$	13,636,708			$	13,548,867			$	12,567,296			$	12,016,280			0.6		%		13.5		%

GEOGRAPHIC CONCENTRATION OF DEPOSITS
		Jun 30, 2021							Mar 31, 2021				Dec 31, 2020				Jun 30, 2020				Percentage Change
		Amount				Percentage			Amount				Amount				Amount				Prior Qtr			Prior Yr Qtr
Washington		$	7,547,591			55.3	%		$	7,504,389			$	7,058,404			$	6,765,186			0.6	%		11.6	%
Oregon		2,939,667				21.6	%		2,929,027				2,604,908				2,440,617				0.4	%		20.4	%
California		2,417,387				17.7	%		2,401,299				2,237,949				2,224,477				0.7	%		8.7	%
Idaho		732,063				5.4	%		714,152				666,035				586,000				2.5	%		24.9	%
Total deposits		$	13,636,708			100.0	%		$	13,548,867			$	12,567,296			$	12,016,280			0.6	%		13.5	%

INCLUDED IN TOTAL DEPOSITS		Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Jun 30, 2020
Public non-interest-bearing accounts		$	187,702			$	151,850			$	175,352			$	139,133
Public interest-bearing transaction & savings accounts		156,987				169,192				127,523				136,039
Public interest-bearing certificates		41,444				51,021				59,127				56,609
Total public deposits		$	386,133			$	372,063			$	362,002			$	331,781
Total brokered deposits		$	—			$	—			$	—			$	119,399

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
		Actual							Minimum to be categorized as "Adequately Capitalized"							Minimum to be categorized as "Well Capitalized"
REGULATORY CAPITAL RATIOS AS OF JUNE 30, 2021		Amount				Ratio			Amount				Ratio			Amount				Ratio
Banner Corporation-consolidated:
Total capital to risk-weighted assets		$	1,618,512			14.62	%		$	885,723			8.00	%		$	1,107,154			10.00	%
Tier 1 capital to risk-weighted assets		1,385,143				12.51	%		664,292				6.00	%		664,292				6.00	%
Tier 1 leverage capital to average assets		1,385,143				8.86	%		625,458				4.00	%		n/a				n/a
Common equity tier 1 capital to risk-weighted assets		1,241,643				11.21	%		498,219				4.50	%		n/a				n/a
Banner Bank:
Total capital to risk-weighted assets		1,505,250				13.60	%		885,354				8.00	%		1,106,693				10.00	%
Tier 1 capital to risk-weighted assets		1,371,881				12.40	%		664,016				6.00	%		885,354				8.00	%
Tier 1 leverage capital to average assets		1,371,881				8.78	%		625,305				4.00	%		781,632				5.00	%
Common equity tier 1 capital to risk-weighted assets		1,371,881				12.40	%		498,012				4.50	%		719,350				6.50	%

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Quarters Ended
	Jun 30, 2021											Mar 31, 2021											Jun 30, 2020
	Average Balance				Interest and Dividends				Yield / Cost(3)			Average Balance				Interest and Dividends				Yield / Cost(3)			Average Balance				Interest and Dividends				Yield / Cost(3)
Interest-earning assets:
Held for sale loans	$	69,908			$	544			3.12	%		$	119,341			$	925			3.14	%		$	152,636			$	1,451			3.82	%
Mortgage loans	7,147,733				80,673				4.53	%		7,144,770				80,580				4.57	%		7,314,125				87,172				4.79	%
Commercial/agricultural loans	2,625,149				33,614				5.14	%		2,691,554				26,711				4.02	%		2,599,878				25,200				3.90	%
Consumer and other loans	122,951				1,828				5.96	%		127,469				1,947				6.19	%		152,438				2,361				6.23	%
Total loans(1)(3)	9,965,741				116,659				4.70	%		10,083,134				110,163				4.43	%		10,219,077				116,184				4.57	%
Mortgage-backed securities	2,440,913				11,563				1.90	%		1,953,820				9,472				1.97	%		1,286,223				8,083				2.53	%
Other securities	1,250,417				7,088				2.27	%		1,048,856				6,687				2.59	%		787,957				5,859				2.99	%
Equity securities	—				—				—	%		1,742				—				—	%		114,349				123				0.43	%
Interest-bearing deposits with banks	1,139,749				376				0.13	%		1,032,138				262				0.10	%		212,502				172				0.33	%
FHLB stock	14,001				161				4.61	%		15,952				161				4.09	%		16,620				300				7.26	%
Total investment securities (3)	4,845,080				19,188				1.59	%		4,052,508				16,582				1.66	%		2,417,651				14,537				2.42	%
Total interest-earning assets	14,810,821				135,847				3.68	%		14,135,642				126,745				3.64	%		12,636,728				130,721				4.16	%
Non-interest-earning assets	1,227,167											1,237,281											1,245,626
Total assets	$	16,037,988										$	15,372,923										$	13,882,354
Deposits:
Interest-bearing checking accounts	$	1,754,363			302				0.07	%		$	1,616,824			315				0.08	%		$	1,376,710			374				0.11	%
Savings accounts	2,622,716				454				0.07	%		2,486,820				521				0.08	%		2,108,896				998				0.19	%
Money market accounts	2,288,638				668				0.12	%		2,242,748				775				0.14	%		1,979,419				1,565				0.32	%
Certificates of deposit	889,020				1,604				0.72	%		913,053				1,998				0.89	%		1,117,547				3,757				1.35	%
Total interest-bearing deposits	7,554,737				3,028				0.16	%		7,259,445				3,609				0.20	%		6,582,572				6,694				0.41	%
Non-interest-bearing deposits	6,057,884				—				—	%		5,663,820				—				—	%		4,902,992				—				—	%
Total deposits	13,612,621				3,028				0.09	%		12,923,265				3,609				0.11	%		11,485,564				6,694				0.23	%
Other interest-bearing liabilities:
FHLB advances	100,000				655				2.63	%		144,444				934				2.62	%		156,374				984				2.53	%
Other borrowings	240,229				124				0.21	%		202,930				109				0.22	%		285,735				238				0.34	%
Junior subordinated debentures and subordinated notes	247,944				2,204				3.57	%		247,944				2,208				3.61	%		149,043				1,251				3.38	%
Total borrowings	588,173				2,983				2.03	%		595,318				3,251				2.21	%		591,152				2,473				1.68	%
Total funding liabilities	14,200,794				6,011				0.17	%		13,518,583				6,860				0.21	%		12,076,716				9,167				0.31	%
Other non-interest-bearing liabilities(2)	199,619											207,560											188,369
Total liabilities	14,400,413											13,726,143											12,265,085
Shareholders’ equity	1,637,575											1,646,780											1,617,269
Total liabilities and shareholders’ equity	$	16,037,988										$	15,372,923										$	13,882,354
Net interest income/rate spread (tax equivalent)					$	129,836			3.51	%						$	119,885			3.43	%						$	121,554			3.85	%
Net interest margin (tax equivalent)									3.52	%										3.44	%										3.87	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(2,282		)									(2,224		)									(1,974		)
Net interest income and margin, as reported					$	127,554			3.45	%						$	117,661			3.38	%						$	119,580			3.81	%
Additional Key Financial Ratios:
Return on average assets									1.36	%										1.24	%										0.68	%
Return on average equity									13.32	%										11.54	%										5.85	%
Average equity/average assets									10.21	%										10.71	%										11.65	%
Average interest-earning assets/average interest-bearing liabilities									181.89	%										179.96	%										176.15	%
Average interest-earning assets/average funding liabilities									104.30	%										104.56	%										104.64	%
Non-interest income/average assets									0.56	%										0.64	%										0.80	%
Non-interest expense/average assets									2.32	%										2.47	%										2.62	%
Efficiency ratio(4)									61.79	%										65.90	%										61.47	%
Adjusted efficiency ratio(5)									59.77	%										63.85	%										58.58	%

(1)		Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans.
(2)		Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)		Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.3 million, $1.2 million, and $1.0 million for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.0 million for both the three months ended June 30, 2021 and March 31, 2021, compared to $963,000 for the three months ended June 30, 2020.
(4)		Non-interest expense divided by the total of net interest income and non-interest income.
(5)		Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
ANALYSIS OF NET INTEREST SPREAD	Six Months Ended
	Jun 30, 2021											Jun 30, 2020
	Average Balance				Interest and Dividends				Yield/Cost(3)			Average Balance				Interest and Dividends				Yield/Cost(3)
Interest-earning assets:
Held for sale loans	$	94,488			$	1,469			3.14	%		$	152,631			$	2,971			3.91	%
Mortgage loans	7,146,260				161,253				4.55	%		7,312,120				180,233				4.96	%
Commercial/agricultural loans	2,658,168				60,325				4.58	%		2,241,942				48,159				4.32	%
Consumer and other loans	125,197				3,775				6.08	%		157,768				4,956				6.32	%
Total loans(1)(3)	10,024,113				226,822				4.56	%		9,864,461				236,319				4.82	%
Mortgage-backed securities	2,198,712				21,035				1.93	%		1,320,404				17,319				2.64	%
Other securities	1,150,193				13,775				2.42	%		623,036				9,169				2.96	%
Equity securities	866				—				—	%		57,175				123				0.43	%
Interest-bearing deposits with banks	1,086,241				638				0.12	%		152,581				565				0.74	%
FHLB stock	14,971				322				4.34	%		21,571				622				5.80	%
Total investment securities(3)	4,450,983				35,770				1.62	%		2,174,767				27,798				2.57	%
Total interest-earning assets	14,475,096				262,592				3.66	%		12,039,228				264,117				4.41	%
Non-interest-earning assets	1,232,196											1,219,440
Total assets	$	15,707,292										$	13,258,668
Deposits:
Interest-bearing checking accounts	$	1,685,973			617				0.07	%		$	1,321,679			843				0.13	%
Savings accounts	2,555,144				975				0.08	%		2,074,377				2,753				0.27	%
Money market accounts	2,265,819				1,443				0.13	%		1,861,268				4,004				0.43	%
Certificates of deposit	900,970				3,602				0.81	%		1,121,270				7,844				1.41	%
Total interest-bearing deposits	7,407,906				6,637				0.18	%		6,378,594				15,444				0.49	%
Non-interest-bearing deposits	5,861,941				—				—	%		4,434,186				—				—	%
Total deposits	13,269,847				6,637				0.10	%		10,812,780				15,444				0.29	%
Other interest-bearing liabilities:
FHLB advances	122,100				1,589				2.62	%		280,901				3,048				2.18	%
Other borrowings	221,682				233				0.21	%		205,253				354				0.35	%
Junior subordinated debentures and subordinated notes	247,944				4,412				3.59	%		148,494				2,728				3.69	%
Total borrowings	591,726				6,234				2.12	%		634,648				6,130				1.94	%
Total funding liabilities	13,861,573				12,871				0.19	%		11,447,428				21,574				0.38	%
Other non-interest-bearing liabilities(2)	203,567											200,265
Total liabilities	14,065,140											11,647,693
Shareholders’ equity	1,642,152											1,610,975
Total liabilities and shareholders’ equity	$	15,707,292										$	13,258,668
Net interest income/rate spread (tax equivalent)					$	249,721			3.47	%						$	242,543			4.03	%
Net interest margin (tax equivalent)									3.48	%										4.05	%
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis					(4,506		)									(3,705		)
Net interest income and margin, as reported					$	245,215			3.42	%						$	238,838			3.99	%
Additional Key Financial Ratios:
Return on average assets									1.30	%										0.61	%
Return on average equity									12.43	%										5.05	%
Average equity/average assets									10.45	%										12.15	%
Average interest-earning assets/average interest-bearing liabilities					`				180.95	%										171.66	%
Average interest-earning assets/average funding liabilities									104.43	%										105.17	%
Non-interest income/average assets									0.60	%										0.71	%
Non-interest expense/average assets									2.39	%										2.79	%
Efficiency ratio(4)									63.79	%										64.40	%
Adjusted efficiency ratio(5)									61.75	%										60.41	%

(1)		Average balances include loans accounted for on a nonaccrual basis and loans 90 days or more past due. Amortization of net deferred loan fees/costs is included with interest on loans.
(2)		Average other non-interest-bearing liabilities include fair value adjustments related to junior subordinated debentures.
(3)		Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.5 million and $2.2 million for the six months ended June 30, 2021 and June 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.0 million and $1.5 million for the six months ended June 30, 2021 and June 30, 2020, respectively.
(4)		Non-interest expense divided by the total of net interest income and non-interest income.
(5)		Adjusted non-interest expense divided by adjusted revenue. These represent non-GAAP financial measures. See the non-GAAP Financial Measures on the final two pages of the press release tables.

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
* Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Banner’s core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
ADJUSTED REVENUE	Quarters Ended															Six Months Ended
	Jun 30, 2021					Mar 31, 2021					Jun 30, 2020					Jun 30, 2021					Jun 30, 2020
Net interest income	$	127,554				$	117,661				$	119,580				$	245,215				$	238,838
Total non-interest income	22,336					24,272					27,720					46,608					46,885
Total revenue (GAAP)	149,890					141,933					147,300					291,823					285,723
Exclude net gain on sale of securities	(77		)			(485		)			(93		)			(562		)			(171		)
Exclude net change in valuation of financial instruments carried at fair value	(58		)			(59		)			(2,199		)			(117		)			2,397
Adjusted revenue (non-GAAP)	$	149,755				$	141,389				$	145,008				$	291,144				$	287,949

ADJUSTED EARNINGS		Quarters Ended															Six Months Ended
		Jun 30, 2021					Mar 31, 2021					Jun 30, 2020					Jun 30, 2021					Jun 30, 2020
Net income (GAAP)		$	54,382				$	46,855				$	23,541				$	101,237				$	40,423
Exclude net gain on sale of securities		(77		)			(485		)			(93		)			(562		)			(171		)
Exclude net change in valuation of financial instruments carried at fair value		(58		)			(59		)			(2,199		)			(117		)			2,397
Exclude merger and acquisition-related expenses		79					571					336					650					1,478
Exclude COVID-19 expenses		117					148					2,152					265					2,391
Exclude related net tax benefit		(15		)			(42		)			(47		)			(57		)			(1,452		)
Total adjusted earnings (non-GAAP)		$	54,428				$	46,988				$	23,690				$	101,416				$	45,066
Diluted earnings per share (GAAP)		$	1.56				$	1.33				$	0.67				$	2.88				$	1.14
Diluted adjusted earnings per share (non-GAAP)		$	1.56				$	1.33				$	0.67				$	2.89				$	1.27

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
ADJUSTED EFFICIENCY RATIO		Quarters Ended															Six Months Ended
		Jun 30, 2021					Mar 31, 2021					Jun 30, 2020					Jun 30, 2021					Jun 30, 2020
Non-interest expense (GAAP)		$	92,624				$	93,527				$	90,542				$	186,151				$	184,005
Exclude merger and acquisition-related expenses		(79		)			(571		)			(336		)			(650		)			(1,478		)
Exclude COVID-19 expenses		(117		)			(148		)			(2,152		)			(265		)			(2,391		)
Exclude CDI amortization		(1,711		)			(1,711		)			(2,002		)			(3,422		)			(4,003		)
Exclude state/municipal tax expense		(1,083		)			(1,065		)			(1,104		)			(2,148		)			(2,088		)
Exclude REO operations		(118		)			242					(4		)			124					(104		)
Adjusted non-interest expense (non-GAAP)		$	89,516				$	90,274				$	84,944				$	179,790				$	173,941
Net interest income (GAAP)		$	127,554				$	117,661				$	119,580				$	245,215				$	238,838
Non-interest income (GAAP)		22,336					24,272					27,720					46,608					46,885
Total revenue		149,890					141,933					147,300					291,823					285,723
Exclude net gain on sale of securities		(77		)			(485		)			(93		)			(562		)			(171		)
Exclude net change in valuation of financial instruments carried at fair value		(58		)			(59		)			(2,199		)			(117		)			2,397
Adjusted revenue (non-GAAP)		$	149,755				$	141,389				$	145,008				$	291,144				$	287,949
Efficiency ratio (GAAP)		61.79			%		65.90			%		61.47			%		63.79			%		64.40			%
Adjusted efficiency ratio (non-GAAP)		59.77			%		63.85			%		58.58			%		61.75			%		60.41			%

TANGIBLE COMMON SHAREHOLDERS’ EQUITY TO TANGIBLE ASSETS		Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Jun 30, 2020
Shareholders’ equity (GAAP)		$	1,669,211			$	1,618,817			$	1,666,264			$	1,625,103
Exclude goodwill and other intangible assets, net		391,125				392,836				394,547				398,276
Tangible common shareholders’ equity (non-GAAP)		$	1,278,086			$	1,225,981			$	1,271,717			$	1,226,827
Total assets (GAAP)		$	16,181,857			$	16,119,792			$	15,031,623			$	14,405,607
Exclude goodwill and other intangible assets, net		391,125				392,836				394,547				398,276
Total tangible assets (non-GAAP)		$	15,790,732			$	15,726,956			$	14,637,076			$	14,007,331
Common shareholders’ equity to total assets (GAAP)		10.32		%		10.04		%		11.09		%		11.28		%
Tangible common shareholders’ equity to tangible assets (non-GAAP)		8.09		%		7.80		%		8.69		%		8.76		%
TANGIBLE COMMON SHAREHOLDERS’ EQUITY PER SHARE
Tangible common shareholders’ equity (non-GAAP)		$	1,278,086			$	1,225,981			$	1,271,717			$	1,226,827
Common shares outstanding at end of period		34,550,888				34,735,343				35,159,200				35,157,899
Common shareholders’ equity (book value) per share (GAAP)		$	48.31			$	46.60			$	47.39			$	46.22
Tangible common shareholders’ equity (tangible book value) per share (non-GAAP)		$	36.99			$	35.29			$	36.17			$	34.89

CONTACT:

MARK J. GRESCOVICH, PRESIDENT & CEO PETER J. CONNER, CFO (509) 527-3636

FAQ

What is the net income of Banner Corporation for Q2 2021?

Banner Corporation reported a net income of $54.4 million for Q2 2021.

When is the dividend payment for Banner Corporation?

The dividend payment of $0.41 per share is scheduled for August 13, 2021.

What percentage increase did core deposits experience year-over-year?

Core deposits increased by 16% year-over-year to $12.76 billion.

How did Banner Corporation's revenues perform in Q2 2021?

Revenues increased by 6% to $149.9 million compared to the previous quarter.

What was the provision for credit losses for Banner Corporation in Q2 2021?

The provision for credit losses showed improvement with a recovery of $10.3 million.